Greece and gas dictating play

The first full week of 2015 has seen some ups and downs with some international politics and oil rates influencing the Sensex and Nifty

Last week, the markets on the domestic front gave up gains on the back of selling in the counters and weak global cues. Nifty was seen crossing below its 50 DMA on the broad based sell off. But rebounds of global conditions supported the markets.

Sensex and Nifty closed down around 1.4 per cent and 1.2 per cent respectively. In the short term we can expect a range of 8144-8335 levels, a break above or below can give major direction to the market.

Good growthThe manufacturing data of the country climbed to a two year high in December on the back of fast expansion in the consumer goods sector and of the strongest growth in exports since April 2011.

The HSBC manufacturing PMI stood at 54.50 from 50.7 in December 2013. The data was at 53.30 in November 2014. The level stood above the 50 mark that separates growth from contraction.

The country’s service sector for December came out last week and showed a moderate growth. HSBC India service PMI data eased to 51.1 from 52.6 in November which was a second straight month of expansion.

However, the reading was above the 50 mark which distinguishes between the expansion and contraction. The headline HSBC composite Output index, which takes both services and manufacturing also eased to 52.9 points from 53.6.

The government may kick start its divestment plan by selling its stake in PFC (Power Finance Corporation) and REC (Rural Electrification Corporation) in the third week of January. The government has decided to divest 5 per cent of the stake in two of the companies.

It has 72.8 per cent in PFC and 65.64 per cent in REC which is expected to garner around Rs 3000 to 3400 crore. The government has proposed 10 per cent stake sale in Coal India in FY15 and also looking more through the CPSE ETF, launched last year.

Earnings up8K miles came out with its earnings where the company’s consolidated net profit rose 29.95 per cent to Rs 5.38 crore on 27.28 per cent rise in the total income to Rs 34.47 crore in Q3 December 2014 over Q2 September 2014.

The stock had outperformed the market over the past one month till January 8, 2015 rising 12.70 per cent compared with 3 per cent fall in Sensex. The small cap company has equity of Rs 10.04 crore and the face value per share is Rs 10. The company offers global secure cloud solutions and managed services.

On the back of weak movements in crude, the global markets were trading lower. Also, the political uncertainty in Greece added woes to the concerns. But the strong US private jobs data and minutes from the FED’s most recent meeting which reassured the investors that the central is in no hurry to start raising its interest rates supported the markets.

House Price Index will be the data China is waiting for in this week. On the Japanese front, current account data and machinery orders will be triggers. In the Euro Zone, the major data to watch out for is industrial production, balance of trade, current account, inflation and core inflation data.

Import and export price index, initial and continuing jobless claims, inflation, core inflation, industrial production, manufacturing production and consumer sentiment data are the important ones in the US markets.

Focus onThis week, earnings will be the key area to focus. The major ones include CMC, Kitex, IndusInd Bank, Bajaj Finserv, NIIT Tech, Bajaj Auto, Axis Bank, Wipro, V-Guard and CYIENT. Besides the earnings, on the economic front, inflation rate, industrial production, manufacturing production and balance of trade will be in focus.

Gold is trading well above the psychological support at $ 1200 and likely to test $1235 in the short-term per troy ounce. As the India VIX is headed down, it is prudent to create a long strangle by buying 8300 call options and 8150 put options of Nifty January series.

Alex K Mathews is the author of Financial Services And Systems, as well as Option Trading: Bear Market Strategies published by Tata McGraw Hill. He is also the technical and derivatives research head of Geojit BNP Paribas Financial Services Ltd. The author may have a vested interest in investments he has recommended. Feel free to e-mail him at alex@geojit.com. Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).